While you were sleeping: East Asian slowdown takes toll

While you were sleeping: East Asian slowdown takes toll
on Wall St, Europe

Oct. 9 (BusinessDesk) - Stocks on
Wall Street and in Europe retreated after the World Bank cut
its growth forecast for East Asia, sparking fears the global
slowdown is snowballing, and as US quarterly earnings season
looms.

The World Bank trimmed this year's forecast for
growth in the emerging East Asian economies amid dwindling
demand for the region's exports as global powerhouses in the
US and Europe tidy up their own affairs. It sees growth in
the region of 7.2 percent this year from 8.3 percent in
2011, the slowest pace since 2001.

That helped push
stocks lower on both sides of the Atlantic, with the
Standard & Poor's 500 index down 0.4 percent to 1455.72 in
afternoon trading in New York, the Dow Jones Industrial
Average down 0.3 percent to 13576.7, and the Nasdaq
Composite Index down 0.8 percent to 3109.84.

"There is
just a lot of uncertainty out there, so any little thing
right now tends to be a bit of a drag. Some of it is China,
some of it may be concerns about Europe again," Peter
Jankovskis, co-chief investment officer at OakBrook
Investments in Lisle, Illinois told Reuters.

The
deteriorating outlook for East Asia comes a day before US
third-quarter earnings season, which kicks off tomorrow when
aluminium producer Alcoa reports. Analysts expect Alcoa will
report a break-even result, and the stock was unchanged at
US$9.09.

Investors have been cautious about the US
earnings season as European leaders muddle their way through
their region's debt crisis and Chinese growth slows from the
heady heights of recent years. Shares of Hewlett-Packard
slumped last week after the company predicted profit for
fiscal 2013 will fall short of expectations.

"Some people
are predicting that we may see an overall decline in
earnings, so there may be some defensive posturing and
profit-taking," Jankovskis said.

Across the pond Eurozone
finance ministers announced a full-time 500 billion euro
fund to help bail-out debt-ravaged nations is operational,
while saying Spain doesn't need a rescue package. The yield
on Spain's 10-year government bond has fallen to 5.71
percent from as high as 7.62 percent on July 24. The euro
fell 0.5 percent to US$1.267.

"Spain is also suffering
under the problem of contagion, like other countries, from
speculation that’s the result of the uncertainty
surrounding the euro area as a whole," German Finance
Minister Wolfgang Schaeuble told reporters as he arrived at
a meeting in Luxembourg. "But Spain doesn’t need an
assistance program."

The finance ministers met in
Luxembourg to discuss Spain's finances and closer
cooperation on banking, ahead of German Chancellor Angela
Merkel's visit to Greece tomorrow.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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